Insurance: Contents Insurance

How gutted would you be if your possessions were, er, gutted in a fire, or if they were stolen? Could you afford to replace everything you own? If not then you need contents insurance regardless of whether you own or rent. In the latter case this is very likely to be your responsibility, not the landlord's.

Here's a list of the sorts of items that are included in a typical household contents policy:

• Clothes
• Accessories
• Shoes
• CDs and DVDs
• TVs, video players and DVD players
• Music systems
• Other geeky modern gadgets
• Stamp, coin or medal collections
• Antiques and pictures
• Jewellery and watches
• Furs
• Luggage
• Sports equipment
• Musical instruments
• Camping equipment
• Photographic equipment
• And, if you're a tenant, your fixtures and fittings!

The sorts of incidents you can get cover for are:

• Fire;
• Lightning;
• Smoke (but not smog);
• Vandalism and theft (or attempted theft);
• Escape of water and oil (The water damage is covered, but the repairs to the faulty tank, pipe or appliance are not.);
• Storm;
• Flood;
• Subsidence;
• Falling trees and branches;
• Falling aerials and satellite dishes;
• Accidental damage to home entertainment equipment, such as TVs and audio equipment.

You should tell your insurer the make and value of any bicycles you possess. To insurers, 'valuables' usually includes furs, musical instruments and sports equipment, in addition to jewellery and expensive gadgets, so ensure that you properly declare everything. If any of your possessions exceed, say, £1,000 in value, you need to tell your insurer (or prospective insurer) about them so that they can discuss terms and any additional premium that's required. It's likely you'll need to provide valuations or receipts for all such items.

You may also want to look for policies that contain further cover, some of which may cost more. These include:

• Accidental damage to mirrors and internal glass;
• Accidental damage for things such as dropping a vase or spilling red wine on the carpet;
• Accidental damage for business equipment;
• Cover for personal possessions that you carry on you out of the home;
• Cover for cash and credit cards;
• Caravan cover;
• Bicycle cover;
• Replacement keys;
• Cover for contents lost or damaged when moving home;
• Replacing spoiled food and drink from the freezer;
• New-for-old cover.

The excess

Typically, you pay a £50 excess for most claims, but if you wouldn't claim for anything worth less than £100, you may as well see if increasing the excess will reduce your premium.

Check your total sum insured

According to a study by the Centre for Economic and Business Research, a typical household's contents are worth around £44,500, whereas the average sum insured is £35,000, which suggests that many of us are under insured by £9,500 (21%).

Now you're thinking, "That's OK, what are the chances of more than £35,000-worth of my belongings being lost, damaged or stolen in one go?" Unfortunately, it doesn't work like that. Home insurers apply a technique called 'averaging' when settling claims. If they surveyed your home after you made a claim, they could discover that your possessions were worth a lot more than the amount you had them insured for. So if, in a Clouseau-esque moment, you'd dropped your new, £1,000 laptop down the stairs, using the above figures you might get £1,000 less 21%, which means you'd receive less than £800.

Keep your insurance up-to-date

It's amazing how much your household items add up, especially the new gadgets. Do a quick inventory using the list at the top of this article (or the Association of British Insurers' spreadsheet); you'll be surprised how much you own. Afterwards, don't forget to call your insurer and amend your policy, and remember to keep them up-to-date on your possessions. Failure to disclose things might invalidate your insurance, or you may be hit by averaging.

You can usually find a cheaper deal at renewal by looking elsewhere, but this is even more likely when the total sum insured changes, so compare insurance quotes.

Reducing the risk of claims

Burglar Alarms

Burglar alarms are proven to reduce burglary risks so if you've got one you're likely to get a cheaper deal from your insurance company.

Locks and ladders

It almost goes without saying that you should change the locks when you move in and ensure that they conform to the British security standard BS3621 (that means they can only be opened by a key). Windows and patio doors need key operated locks, and don't leave ladders or steps in the garden or in unlocked sheds. They, together with tools from an unlocked garage, can easily provide the means for a villain to gain entry through an upstairs window.

Make it difficult

Access to ground-floor windows can be made more difficult by growing prickly bushes like berberis and pyracantha under them. Don't plant hedges and tall plants close to doors, as they could hide nasty people. Garden fences and gates should be kept in good order too, in fact anything to make life more difficult for the robber. If you go away on business or holiday use a timer switch to ensure lights, radios and TVs come on at appropriate times. Doing all these things, and joining your local Neighbourhood Watch scheme, ought to entitle you to a 5 or 10 percent discount on your premium.

Index-linked policy

As with buildings insurance, some insurers offer policies linked to rising prices (inflation), so that the total sum insured goes up automatically each year. However, you should check the value of your possessions on a regular basis to ensure you're not over- or under-insured.

Cheaper insurance

If you're currently insured via your mortgage lender, you're probably paying over the odds. Whoever you're with, don't just renew each year, as that's the easiest way to be overcharged. For just a little effort, the savings over the long-term can be considerable.

Also, beware of direct debits, as you can be charged 30% interest! It makes more sense to save up, or to pay for it using a 0% on purchases credit card.

The additional accidental damage cover might be useful if you have wild children running about the place, but otherwise the basic cover of TVs and DVD player-type gadgets may be enough.

Lastly, if your home is a paranoid's dream-house of locks and alarms, you could sign up for an extra security discount. Be wary of the small print though: you're not allowed to leave any windows open and unlocked when the house is unoccupied - even for five minutes!

Compare home insurance quotes

Published on December 8, 2006